Icra forecasts an 8-10% growth in the two-wheeler sales volumes in the financial year 2018.

After five months of a slowdown in two-wheeler sales due to the cash crunch and the ban on Bharat Stage III (BS III) vehicles, the effects of demonetisation seem to finally be waning off, resulting in a recovery in demand, according to the rating agency ICRA. The agency forecasts an 8-10% growth in the two-wheeler sales volumes in the financial year 2018.

Two-wheeler manufacturers in May, recorded strong double digit growth year-on-year in sales volumes. HMSI (Honda Motorcycle and Scooter India) said its two-wheelers sales grew by 23% in May, while Royal Enfield registered a 25% growth.

The two-wheeler space in India saw a growth decline of 6.5% Y-o-Y in the last five months of financial year 2017, which is contrast to the double digit growth experienced in the first seven months, says ICRA.

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“The new fiscal has started off with a growth of 7.3% in April 2017, with the impact of demonetisation wearing off both major product segments (scooters and motorcycles) are gradually reporting an uptick in their growth rates,” said Subrata Ray, senior vice president and group head, corporate sector ratings, ICRA.

The sales of the entry sub-segment level motorcycles (motorcycles with an engine capacity between 75-110 cc) in March-April 2017, have been the slowest to recover, primarily due to their high rural dependence. Whereas, the 110-125 cc sub-segments and the premium segment have witnessed healthy volumes in the same period.

“Besides pent up of demand consequent to the deferment of purchases during Q3 and Q4 FY2017 augur well for demand revival on the rural front. On the other hand, urban sentiments are expected to draw support from staggered pay revision for state government employees and pensioners as well as muted CPI inflation,” suggests ICRA.